Former Refco CEO sentenced to 16 years

By Dan Wilchins

NEW YORK (Reuters) - Phillip Bennett, the former chief executive of Refco, was sentenced to 16 years in prison on Thursday for fleecing investors of more than $2.4 billion (1.21 billion pounds) in a fraud that destroyed the world's largest independent commodities broker.

The sentence marks the latest chapter in the decline and fall of Phillip Bennett, 59, who built Refco into a global commodities trading empire only to see it unravel in 2005 after the company disclosed an accounting deception.

U.S. District Judge Naomi Buchwald ordered Bennett to be kept under house arrest in his New Jersey home until he surrenders to a federal facility on September 4. After serving his sentence, Bennett is to be deported to his native United Kingdom.

"You tried to make Refco successful, but your success was in many ways a sham," Buchwald said.

Bennett pleaded guilty in February to 20 counts of fraud, conspiracy, money laundering and lying to auditors and others. His plea came just a month before he was set to go to trial, after two-and-a-half years of litigating his case.

Bennett, who at Refco's peak was a billionaire, but will forfeit all his assets as part of his sentence, was penitent on Thursday.

"During these 33 months (since Refco went bankrupt), I've come to realize that, despite the best of intentions, I made an unacceptable and appalling error in judgment," he said.

Prosecutors said Bennett conducted his fraud over eight years. In the late 1990s, a series of Refco loans to customers went bad. Bennett engineered fraudulent transactions to take the bad debt off the company's balance sheet at the end of reporting periods, so investors and others would not know about them. He engaged in other manoeuvres designed to hide Refco's lack of cash flow as well, prosecutors said.